DO NUMBERS LIE? WHAT IS TRULY HAPPENING IN CALIFORNIA REAL ESTATE?

 Everyone gets numbers to lie about something sometime.  Are economists any different?  Is the desire to get numbers to match their predictions so important as to exclude reality?  The short answer... Maybe.  Here are some interesting food stats for thought.  All of the headlines have proclaimed a possible double dip.  This column disagrees, and rather thinks we are bouncing along the bottom, represented by slight upticks in certain areas and size of homes and downticks in others.  If you look at just closings, it would appear to be true.  But if you take a look at pending activity, that is sales posted through the Multiple Listing Service and in the real estate offices, you would find that activity is about par with 2010.  Steve Thomas, a real estate analyst, did precisely that.   The number of new sales, according to Steve, declined by just 47 for the past month when compared with a year ago.  In fact there were 3,060 pending homes this past month and 3,107 at this time a year ago, so demand was almost identical.  So where does the Voodoo Math come from?  The closings themselves.  No one in real estate right now will argue the point of how incredibly difficult it is to close transactions.  Title companies report healthy openings, given the market, in fact numbers month over month, all year, that are exceedingly close to those of 2010.  And yet revenue, is low.  Why?  Two really good reasons; first of all, short sales can take 6 to 10 months to close.  So even if your pending sales are at a solid number, the trickle-down effect takes a lot of momentum away.  It is excruciatingly slow to close transactions for other reasons, such as the loan.  Ask any lender, you can have a fully qualified buyer and the process is still long and arduous.  Washington, in its infinite wisdom has placed all kinds of "safeguards" that do nothing more than muck the waters and make it virtually impossible for honest loan officers to do their jobs.  Once again, it's too much, too late.  The offending "lenders" responsible for the sub-prime meltdown, left the business 3 years ago.  Now it is seriously hobbled, by Washington's bureaucracy.  Don't believe it?  Talk to any loan officer with any bank or mortgage company.
 
The other big fallacy?  There are only distressed sales.  Not true.  Are their foreclosed properties being offered by the banks as REO listings (real estate owned)?  Yes, of course.  Are there short sales?  Yes, of course.   But not as many as the papers would have you think.   See the next column for exact numbers.  But there are an increasingly high number of "equity" or "full" sales.  There are plenty of buyers who will pay a premium for the opportunity to buy a turnkey property with no deferred maintenance and no 6 to 10 month escrow, that needs bank approval.  Another fallacy is that the REO comparables ruin it for the equity seller.  Every area is different of course, but numbers show that for the most part, equity sellers maintain a much higher price per square foot than distressed properties.  The point is, consult a Realtor.  Talk to an expert.  The papers want to sell papers.  That's fine.  But we the general public, owe it to ourselves to do our own investigating.  Because, real estate is a great deal right now, prices are the lowest we may see in our lifetime, and interest rates are lower than they were in the 1950's and they won't stay low forever either. What is your situation?  Only you know, but you owe it to yourself to check it out and not just from the papers.

WHAT WERE THE EXACT NUMBERS?

All Southern California counties (Ventura, LA, OC, Riverside, San Bernardino, and San Diego) sold 18,394 homes in the month of May (the last complete month available).  That was up 0.3% from April, but down 17.4% from a year ago.  (closings, not pendings)  The total number of sales for Orange County was 2,664 and that was off 5.6% from April and 18.2% from a year ago.  Given those overall numbers, here are some worth noting:  There were 1,230 full sales (equity), only 266 short sales, and only 248 bank owned closings.  This is for single-family resale.  Note how many more equity sales there were than distressed.  Condos fared not as well; the ratios were closer to 50/50.  There were 378 full sales, 198 short sales, and 194 REO or bank owned.  Overall median price per square foot was $285 for full sales, $248 for short sales, and $241 for REO.  There were 1,201 notices of default recorded, 1,720 notices of trustee sale recorded.  The disparity in these numbers is mainly due to banks finally finishing the foreclosure process for many homes that have been in default, literally, for years.
There were 473 properties that went to foreclosure auction, that no one bought, and they became the latest crop of bank owned properties.  However there were 222 properties that were purchased at auction by private parties.   Again there was a large number of homes sold under $400,000 -- 1,155 to be exact.  The opposite end, the number over $700,000 was 483.  All other sales fell in between.  (Source: Dataquick / Gregorich/ Public Records) 

EQUITY IS AN ISSUE FOR MOST HOMEOWNERS

Jonathan Lansner of the Orange County Register rightly reported that 1 in 6 homeowners in OC have no equity.  Well, he got his info from CoreLogic, a real estate data and information services company.  What they have is an estimate of 17.5% of homes are "upside down."  This is based on calculations down payments and cash out refinances.  Nationwide, it is estimated to be 22.7% that are upside down, so So Cal isn't looking so bad.  Although there is no arguing that equity is in a tenuous position for many homeowners, this column does take issue with another headline in the Register that read, "Orange County housing still unaffordable."  Really?  You have nothing better to write than a pessimistic, misleading headline like that?  If one went on to read the article, it stated that OC median housing prices were 2 and 1/2 times greater than the US median price.  What a surprise.  So we are pricier than Des Moines, Iowa, or Little Rock, Arkansas, or Topeka, Kansas or a myriad of small towns across America.  Would it not have been more "Apples to Apples" to have compared affordability with other metropolis' such as San Francisco, Los Angeles, Boston, New York, or Miami.  How do we fare then?  Actually, OC has never been so affordable to so many since the early 1970's.

NEW BILL PREVENTS ALL LENDERS FROM PURSUING BORROWERS AFTER AN APPROVED SHORT SALE

Breaking news about short sales. Governor Jerry Brown has signed a new law that will have a profound effect on the short sale industry:

Previously, SB 931 and Civil Code 580e prevented first mortgage lenders from pursuing a seller for a deficiency after a short sale. However, holders of second or third mortgages could still pursue the seller.

However, Governor Jerry Brown just signed Senator Corbett’s bill 458 which states that once a short sale has been approved, ALL MORTGAGE DEBT IS FORGIVEN. This includes mortgages on primary residences, investment properties, second or third liens, etc. Once you get approval for a short sale, and once the short sale is complete, lenders can no longer pursue you for money that you previously owed them.

People who were hesitating to do short sales can now take a deep breath and sell their homes with no fear of deficiency after the fact. This bill goes into effect immediately. If you live in Orange, Yorba Linda, Villa Park, Placentia or any other North Orange County city, and you have questions about short sales, contact me immediately. I have facilitated many short sales transactions and would love to help you avoid foreclosure by doing a short sale instead.

HOMEBUILDING HIBERNATION ENDS

This was the headline of the Orange County Register on Sunday May 22nd.  The entire real estate section was focused on all the housing developments that are picking up steam by most So Cal builders.  The California division president of Fieldstone communities delivered the following quote, "It makes sense (to build) again.  We can deliver a product where there's demand.”  This column has been emphasizing for a few months, that the lapse in building over this fairly prolonged period of time, will result in heavy pressure on the resale market.  That's good for homeowners who have hung in there, despite the odds, and have stayed current on payments and are riding out this temporary loss of equity.  Why do I say temporary?  Let's look at investments for the last ten years.  There is not enough space here to do a comparison chart, but do your own.  Take a look at the S & P 500, the Dow Jones, Nasdaq, and Real Estate.  Let's see which one, held from 2000 to 2010 (the worst decade, all agree, in real estate) and see which investment fared best.  The short cut answer: real estate.  Also, with that investment, you managed to leverage your money and buy something somewhere between 10 X's and 5 X's your investment, depending on your down payment.  You more than likely fixed your housing cost, unlike renting, and if you didn't use your home like an ATM, you have built equity.  Let's not forget one of the best tax breaks for the middle class, interest deduction.  Buying real estate doesn't sound so bad... No wonder they're building again.  All agree building has been in the tank.  This column has reported how low permits and percentages have been off.  So after nearly 2 years of a blank in the building department, 28 developments have started the building process in one way or another.  According to Irvine-based housing consultant John Burns, "builders are coming out of hibernation."  The projects together include approximately 3,000 homes and townhouses and duplexes.  Compare that to the paltry 1,600 of 2008-09.  But catch up doesn't happen overnight.  Short sales and foreclosures will continue to be a part of the market mix for several years to come, and certain buyers will be drawn to them for either "patience equity" or investors looking to rehab and sell.  Equity, or standard sales, will continue to rule the qualified buyer who can afford to pay market rate for a turnkey property.

CALIFORNIA HOME SALES AND PRICES FALL IN APRIL, BUT BOUNCE UP IN MAY

There is no doubt in anyone's mind, who works in real estate full time, that 2011 has had an uneven edge to it.  One month sales seem solid, the next, it sputters.  The real culprit in this is not affordability; it's at an all time high.  It's not selection, there is ample inventory, and it's not a lack of qualified buyers or motivated sellers.  The real culprit is the impression that the media has given as to the availability of money.  Many people think it's tighter than ever.  Getting a loan is difficult.  Actually, that's not true.  So if you are a buyer who has been staying away because you think you can't get a loan unless you have a 740 FICO and 20% down, go start looking for your dream home, because that's not the truth.  Do you have to be qualified?  Yes.  Do you have to have a job?   Yes.  Can you get a stated income loan?  No.  Can you get a fully documented FHA, VA, or Conventional loan?  YES!!

ELIMINATION OF HOME INTEREST DEDUCTIONIS IN THE SIGHTS OF CONGRESS

If you care about your right to own property, if  you believe in the last true deduction for the middle class that amounts to more than a hill of beans, this should be a cause you that catches your attention.   Eliminating home interest deduction is definitely part of the deficit reduction conversation, and it shouldn't be.  For those of us who are not wealthy, and cannot take part in the many loop holes that keep corporations and individuals from paying their fair share, this is our best deduction.  Please contact your federal senators and congresspersons and make your voice heard.  If we don't take a stand as homeowners, they will take it for us.  Fight for your right to the American Dream and to an honest deduction that should be a matter of course.